Japan WT/TPR/S/211 
 Page 15 
 
 
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
(1) INTRODUCTION  
1. The only major change in Japan's government ministries and agencies responsible for the 
formulation, implementation, and evaluation of its  trade policies since its previous Trade Policy 
Review in 2007 involves the abolition on 28 Decemb er 2007 of the cabinet-level Japan Investment 
Council, and the establishment of the Expert Committ ee on FDI Promotion within the Cabinet Office.   
2. Japan's trade policy priorities include strengt hening the multilateral trading system, as 
embodied in the WTO.  Nonetheless, Japan is of th e view that its regional and bilateral free-trade 
agreements complement trade liberalization at the multilateral level.  During  the period under review, 
six additional agreements entered into force (with  Chile, Thailand, Indonesia, Brunei, ASEAN, and 
the Philippines);  several others are being negotia ted.  The agreements with countries that are 
significant exporters of agricultural products tend to  exclude many of these products.  They also 
exclude certain industrial goods, such as leather produc ts and footwear, which the authorities consider 
to be highly sensitive.  
3. Japan has been a major partic ipant in WTO activities, including negotiations under the Doha 
Development Agenda (DDA).  It has been a party to three disputes, one as a respondent and two as a 
complainant since 2007. 
4. Japan has continued to adopt measures to in crease the transparency of its trade and 
trade-related policies, practices, and measures, th ereby enhancing the Government's accountability to 
the public.  Since March 2007, administrative or gans have been require d to conduct ex-ante 
evaluation of regulations.  A procedure for ex-ant e regulatory impact analysis has been introduced 
since 1 October 2007;  ex post evaluation is requi red under the Government Policy Evaluation Act of 
2001. 
5. Japan grants preferential treatment to products  from certain developing and least developed 
countries under its Generalized System of Preferen ce (GSP) scheme.  The current GSP scheme, which 
is valid until 2011, extends to 141 co untries and 14 territories.  On 1 April 2007, Japan expanded the 
preferential (i.e. tariff-free and quota-free) treatment  granted to 49 least developed countries (LDCs), 
covering 98% of all tariff lines.  The main benefi ciaries of Japan's GSP include China, Thailand, 
Indonesia, the Philippines, and Viet Nam.  The G SP scheme excludes many agricultural products and 
some industrial products.   
6. Inward FDI in Japan remains substantially lo wer than outward FDI, and is relatively low 
compared with that in other large OECD economies.   Against this background, Japan has continued to 
take measures to make itself an attractive investment destination for foreign firms;  for example, in its 
FY2007 tax reform, the Government adopted ta x measures aimed at facilitating mergers and 
acquisitions (e.g. triangular mergers).  On the othe r hand, for the first time under the current Foreign 
Exchange and Foreign Trade Law, the Governme nt has issued a recommendation against an FDI 
proposal on the grounds of "public order,  public safety, and national security".  
(2) TRADE POLICY OBJECTIVES  
7. Japan's overall trade policy objective is to en sure long-term prosperity and growth by 
promoting business activities in Japan and at an intern ational level;  this is largely unchanged since its 
previous Trade Policy Review.  To this end, Jap an seeks a further strengthening of the multilateral 
trading system, and has been participating actively in  the DDA negotiations.  Japan is of the view that 
the simplicity embodied in the most-favoured-nation principle provides a predictable and fair trade WT/TPR/S/211 Trade Policy Review 
Page 16 
 
 
regime for all WTO Members, in particular developing Members, and maintains that the WTO has an 
essential role in formulating trade rules and libera lizing trade globally.  The authorities state that 
Japan remains committed to the DDA, and intends to make every effort toward reaching agreement in 
the negotiations.  With a strong preference for multilate ral trade liberalization, Japan grants at least 
MFN treatment to all countries except Andorra, Re public of Equatorial Guinea, Eritrea, Lebanon, 
North Korea, and Timor-Leste (the same as in 2007).1  Although data are not available on the value of 
imports subject to preferential duties, judging from the trade data, it would appear that the MFN rate 
is applied to more than 85% of Japan's imports.  
8. Concurrently, Japan has been intensifying its  pursuit of bilateral/regional arrangements 
involving free-trade agreements;  the authorities state that this is not just in areas covered by existing 
WTO Agreements, but also in areas like trade facil itation, investment, movement of natural persons, 
competition policy, and improvement of the business environment.2  The authorities consider that 
Japan's regional and bilateral trade arrangements co mplement the multilateral system, and are useful 
tools for market liberalization and structural reform.  Additional reforms introduced under the 
bilateral FTAs to which Japan is currently a party,  other than the introduction of preferential tariffs 
and other border measures, include reform measures involving movement of natural persons.  Japan's 
FTAs with Chile, Thailand, Indonesia, Brunei, A SEAN and the Philippines entered into force on 
3 September 2007, 1 November 2007, 1 July 2008, 31 July 2008, 1 December 2008, and 11 December 2008, respectively.  Japan is currently negotiating FTAs with the Gulf Cooperation 
Council (Bahrain, Kuwait, Oman, Qata r, Saudi Arabia, the United Arab  Emirates), Viet Nam, India, 
Australia, and Switzerland.  It held working-level co nsultations in June 2008 to "consider and create a 
favourable environment for the resumption of negotia tions" with the Republic of Korea.  Japan also 
supports the "open regionalism" approach of th e Asia-Pacific Economic Cooperation (APEC) forum, 
and participates in various other regional trade fo ra, such as the Asia-Europe meeting (ASEM), the 
ASEAN+3, and the East Asian Summit. 
9. In the WTO, Japan has recently sought to curtail unilateral export restrictions by its trading 
partners, especially those concerning food and natural resources.
3 
(3) TRADE POLICY FORMULATION AND EVALUATION  
(i) Trade policy formulation and implementation 
10. There has been no major change in Japan's trad e-related legal and administrative framework 
since its previous Review (Table II.1).  Trade-rela ted issues remain the responsibility of a number of 
ministries, including Foreign Affairs (MOFA), and Economy, Trade, and Industry (METI).  Other 
ministries and agencies with responsibility for sector al issues are also involved in trade policy 
formulation and implementation.4  The overall coordination of trade policies, including ensuring 
policy coherence and consistency with the WTO Ag reements, remains the final responsibility of the 
Cabinet, with input from advisory councils, such  as the Council on Economic and Fiscal Policy.  The 
current Council for the Promotion of Regulator y Reform (CPRR), established in January 2007 
through the reorganization of the previous CPRR, has been designated as the central body to promote 
                                                      
1 Japan applies preferential tariff rates to selected products originating in the Republic of Equatorial 
Guinea, Eritrea, Lebanon, and Timor-Leste (the same as in 2007).   
2 Japan prefers to call these preferential agreements Economic Partnership Agreements (EPAs) rather 
than FTAs.   
3 WTO documents G/MA/W/90 and 93, 21 September 2007 and 23 September 2008. 
4 These include the Ministries of Agriculture, Forestry and Fisheries;  Education, Culture, Sports, 
Science and Technology;  Environment;  Finance;  Health , Labour and Welfare;  Jus tice;  Land, Infrastructure 
and Transport;  and Internal Affairs and Comm unications;  as well as the Cabinet Office. Japan WT/TPR/S/211 
 Page 17 
 
 
regulatory reform.  The CPRR is mandated to monito r the implementation of the Three-Year Program 
for the Promotion of Regulatory Reform, and can require the heads of relevant governmental 
organizations to submit materials, provide explan ations, and extend cooperation to the CPRR.  Trade 
and trade-related policy issues are also debated in  various Committees, including standing committees 
in the Diet.5 
Table II.1 
Major trade-related laws and regulations, September 2008  
 Most recent amendment 
Foreign trade and exchange restrictions  
Foreign Exchange and Foreign Trade Law (1949 Law No. 228)  2006 
Export and Import Transaction Law (1952 Law No. 299)  2007 
Foreign Exchange Order (1980 Order No. 260)  2006 
Cabinet Order on Inward Direct I nvestment (1980 Order No. 261)  2007 
Export Trade Control Order (1949 Order No. 378) 2007 
Import Trade Control Order (1949 Order No. 414)  2003 
Customs- and tariff-related regulations  
Customs Law (1954 Law No. 61)  2007 
Customs Tariff Law (1910 Law No. 54)  2007 
Temporary Tariff Measures Law (1960 Law No. 36)  2007 
Cabinet Order Relating to Counterva iling Duties (1994 Order No. 415)  2004 
Cabinet Order Relating to Anti-Dump ing Duties (1994 Order No. 416)  2007 
Cabinet Order Relating to Emerge ncy Duties (1994 Order No. 417)  2002 
Cabinet Order Relating to Retaliato ry Duties (1994 Order No. 418)  2000 
Cabinet Order on Tariff Quotas (1961 Order No. 153)  2007 
Trade promotion  
International Trade Insurance Law (1950 Law No. 67)  2008 
Services and energy   
Construction Business Law (1949 Law No. 100) 2007 
Banking Law (1981 Law No. 59)  2006 
Insurance Business Law (1995 Law No. 105)  2007 
Financial Instruments and Exchange Law (1948 Law No. 25)  2007 
Telecommunications Business Law (1984 Law No. 86)  2007 
Law Concerning the Measures by Large-Scale Reta il Stores for Preservation of Living Environment 
(1998 Law No. 91)  
Employee's Pension Insurance Law (1954 Law No. 115) 2007 
Civil Aeronautics Law (1952 Law No. 231)  2006 
Marine Transportation Law (1949 Law No. 187)  2008 
Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers (1986 
Law No. 66)  2003 
Certified Public Accountants Law (1948 Law No. 103)  2008 
Certified Tax Accountant Law (1951 Law No. 237)  2007 
Law for Improvement of International Tourist Hotels (1949 Law No. 279)  2006 
Travel Agency Law (1952 Law No. 239)  2005 
Electricity Utilities Industry Law (1964 Law No. 170)  2006 
Gas Utility Industry Law (1954 Law No. 51)  2006 
Table II.1 (cont'd) 
                                                      
5 These include standing committees on:  Foreign Affairs, Economy, Trade and Industry;  Financial 
Affairs;  Forestry and Fisheries;  and Fundamental National Policies.  Each committee consists of 10 to 
50 members. WT/TPR/S/211 Trade Policy Review 
Page 18 
 
 
 Most recent amendment 
Petroleum Reserve Law (1975 Law No. 96)  2003 
Law on the Quality Control of Gasoline and Other Fuels (1976 Law No. 88)  2005 
Standards and technical regulations  
Industrial Standardization Law (1949 Law No. 185)  2005 
Law Concerning Standardization and Proper Labe lling of Agricultural and Forestry Products 
(JAS Law) (1950 Law No. 175)  2005 
Pharmaceutical Affairs Law (1960 Law No. 145)  2006 
Food Sanitation Law (1947 Law No. 233)  2006 
Quarantine Law (1951 Law No. 201)  2008 
Plant Protection Law (1950 Law No. 151)  2005 
Domestic Animal Infectious Diseases Control Law (1951 Law No. 166)  2005 
Building Standard Law (1950 Law No. 201)  2007 
Electrical Appliance and Material Safety Law (1961 Law No. 234)  2007 
Consumer Product Safety Law (1973 Law No. 31)  2007 
High Pressure Gas Safety Law (1951 Law No. 204)  2006 
Road Vehicle Law (1951 Law No. 185)  2007 
Rational Use of Energy Law (1979 Law No. 49)  2006 
Fire Service Law (1948 Law No.186) 2007 
Intellectual property rights  
Patent Act (1959 Law No. 121)  2007 
Customs Tariff Law (1910 Law No. 54)  2007 
Act Against Unjustifiable Premiums and Misleading Representations (1962 Law No. 134)  2005 
Unfair Competition Prevention Law (1993 Law No. 47) 2007 
Utility Model Act (1959 Law No. 123) 2007 
Design Act (1959 Law No. 125)  2007 
Trademark Act (1959 Law No. 127)  2007 
Copyright Law (1970 Law No. 48)  2006 
Civil Code (1896 Law No. 89)  2006 
Penal Code (1907 Law No. 45)  2007 
Agriculture  
Basic Law on Food, Agriculture and Rural Areas (1999 Law No. 106)  
Temporary Law for Compensation Price of Milk for Manufacturing Use (1965 Law No. 112)  2002 
Raw Silk Import Coordination Law (1951 Law No. 310)  2002 
Others  
Law Concerning the Organization of Small and Medium Enterprises Organizations 
(1957 Law No. 185)  2006 
Administrative Procedure Law (1993 Law No. 88)  2006 
Act Concerning Prohibition of Private Monopo lization and Maintenance of Fair Trade 
(Anti-Monopoly Act) (1947 Law No. 54) 2005 
Source:  Information provided by the Japanese authorities. 
(ii) Trade policy evaluation 
11. Under the Government Policy Evaluations Act (G PEA), the Cabinet Office and ministries are 
required to evaluate their own policies before and after implementation and to publish the results of 
their evaluations (Chart II.1).6  Based on the GPEA, the Basic Guidelines for Implementing Policy 
                                                      
6 According to Transparency International's 2007 Corruption Perceptions Index, which measures 
perceptions of corruption among public officials and politicians in 180 countries/economies, Japan ranked 17th Japan WT/TPR/S/211 
 Page 19 
 
 
Evaluation was adopted by the Cabinet in Decemb er 2001.  As well as these self-evaluations, the 
GPEA obliges the Ministry of Internal Affairs and Communications (MIC) to undertake independent 
assessments of the policies implemented by other ministries.7  The authorities state that the results of 
the self-evaluations are reflected in the annual budge t formulation process;  the Ministry of Finance 
conducts its own policy evaluation of selected expe nditure programmes, and the results of these 
evaluations are also taken into consideration in the annual budget formulation.  In FY2007, the MOF 
conducted evaluations of 62 projects, and as a result,  allocations for some projects were reduced or 
eliminated in the FY2008 budget.   
Chart II.1
Policy evaluation system in Japan, 2008     
MIC (Administrative Evaluation Bureau)
Promotion of the policy evaluation system (as a ministry responsible for the system)
                  Implementation of evaluations (as the specialized evaluation organization)
                  (1)  Coherence/comprehensiveness-ensuring evaluation
                  (2)  Activities to ensure objectivity in policy evaluationsReport
Cabinet Office and ministriesDiet
Policy implementation
(DO)Investigation and deliberation
Source :   Information provided by the Japanese authorities.Commission on Policy Evaluation 
and Evaluation of Incorporated 
Administrative AgenciesPrime Minister
Request for advice Submission of opinions
Citizens  Publication
Policy management cyclePlanning
(PLAN)Evaluation 
(SEE)Opinions based on 
evaluation resultsEvaluation documents Liaison/coordination
  Publication
 
 
12. In the amended Cabinet Order for Enforcement of the GPEA, issued in March 2007, 
administrative organs are required to conduct ex-ant e evaluation of regulations when they intend to 
introduce, abolish or change regulations based on la ws or cabinet orders.  A procedure for regulatory 
                                                                                                                                                                     
with a score of 7.5 out of 10.  Japan's position has re mained unchanged since 2006 (Transparency International 
online information.  Viewed at:  http://www.transparency.org). 
7 The Act established a Commission on Policy Evaluation and Evaluation of Incorporated 
Administrative Agencies under the Ministry of Internal Affairs and Communications to study and deliberate on issues concerning policy evaluations.  The Commission consists of 45 members made up of academics, the 
private sector, and journalists.  The results of the Commi ssion's discussions are released  to the public.  The main 
issues covered by the Commission since 2006 are:  ensuring evaluations of important policies at the Cabinet level, and mandating ex-ante evaluation of regulations to administrative organs. WT/TPR/S/211 Trade Policy Review 
Page 20 
 
 
impact analysis (RIA), which aims to predict e ffects and burdens arising from the implementation of 
regulations, was introduced officially as "ex-ante  Evaluation of Regulations" on 1 October 2007.  
Under the GPEA, administrative organs are also  required to conduct ex post evaluation;  the 
Implementation Guidelines for ex-ante Evaluation of  Regulations also require that an evaluation 
report must contain the time and conditions for re viewing the appropriateness of regulations in the 
light of the social and economic s ituation.  The authorities consider it important to improve the quality 
and understanding of regulations by  publishing the results of ex-ante evaluations.  Basic Guidelines 
for Implementing Policy Evaluation were also  revised in March 2007 to recommend that 
administrative organs conduct ex-ante evaluation of regulations for which this was not a requirement. 
13. The authorities indicate that, in accordance with the Basic Guidelines, administrative organs 
have taken steps to extend the evaluation process to  important cabinet policies, such as what the 
Cabinet has identified as a priority area in the Pr ime Minister's policy speeches;  and to further 
improve and review policies by utilizing results of ev aluations.  The authorities state that 265 (47.7%) 
of the 555 ex-post evaluations undertaken during FY2007, resulted in improvement and review of 
policies (including abolition).  According to the au thorities, some of these policy evaluations involve 
analysis of cost-effectiveness.8 
14. The Revised Administrative Procedure Law, wh ich includes the legislation on the "public 
comment" procedure, stipulates that ministries and agencies must publish draft regulations (including 
draft cabinet orders or ministerial orders) and recei ve comments from the public;  they must allow, in 
principle, at least 30 days to receive comments, from the date of publication of the draft.9  Ministries 
and agencies are required to consider the comm ents submitted by the public and publish the 
comments, as well as the results of their considerati on, and the reason for the results.  The Ministry of 
Internal Affairs and Communications (MIC) conducts  and publishes a comprehensive annual survey 
on the implementation of the public comment pro cedure under the Administrative Procedure Act.  
The FY2007 survey was published on 26 August 2008.  
(iii) Transparency 
15. All laws, regulations, and rules are published in the Government Gazette .  The Government 
makes available all laws, Cabinet orders, and minist erial ordinances on the Internet;  however, various 
Cabinet decisions and "understandings " are not available.  Each ministry decides whether to put 
relevant cabinet decisions on its own website and/ or to publish the decisions (including in the 
Government Gazette ) when it considers it necessary.  As a part of the Government's efforts to increase 
transparency, it has reportedly launched a project to translate all laws and regulations "of great 
interest" into English.10  
                                                      
8 Policy evaluations by ministries and agencies are available (in Japanese) at MIC online information.  
Viewed at:  http://www.soumu.go.jp/hyouka/se isaku_n/seisaku_fusyou.html [25.06.2008]. 
9 The law entered into force on 1 April 2006.  If the authorities decide that comments are required 
within less than 30 days of publication, th ey must publish the reason for this decision. 
10 Under the Translation Development Programme fo r FY2006-08, the Governme nt aims to translate 
about 300 laws and regulations into English.  See Ca binet Secretariat online information.  Viewed at:  
http://www.cas.go.jp/jp/seisaku/ hourei/data1.html;  about 140 translations were available as of September 2008.  
The Ministry of Justice assumes responsibility for the main part of the programme, including the establishment of a new website.  Japan WT/TPR/S/211 
 Page 21 
 
 
(4) TRADE AGREEMENTS AND ARRANGEMENTS  
(i) WTO 
(a) Participation in the WTO 
16. As a strong supporter of the multilateral tradi ng system, Japan participates actively in the 
WTO, including in the Doha Deve lopment Agenda (DDA).  As regards Aid for Trade, prior to the 
Hong Kong Ministerial Conference, Japan launc hed the Development Initiative for Trade, a 
comprehensive package of development assistance to developing countries.  The authorities state that Japan remains committed to the DDA and will con tinue to make every effort toward reaching 
agreement in the negotiations.  Like all Members, Japan is required to notif y its laws and measures 
under various WTO Agreements (Table AII.1). 
(b) Disputes 
17. Since 2007, Japan has been involved in one  dispute as a respondent and two cases as a 
complainant (Table AII.2).  In addition, Japan participated as a third party in four dispute cases.
11 
(ii) Regional agreements 
(a) Japan and ASEAN (Association of  South-East Asian Nations) 
18. Although not a member of the ASEAN, Japan along with China and the Republic of Korea 
holds regular meetings with ASEAN under the AS EAN+3 framework of co operation.  High level 
meetings are held annually;  the tenth and eleven th ASEAN+3 summits were  held in January and 
November 2007.  The third East Asian Summit meeting was also held in November 2007.  
19. On 21 November 2007, at the eleventh ASEAN-Japan Summit, the Heads of 
State/Governments of member countries issued a statement welcoming the conclusion of the 
negotiations for the ASEAN-Japa n Comprehensive Economic Part nership  Agreement (AJCEP), 
which includes trade in goods, trade in services, investment, and economic cooperation.  By April 2008, the AJCEP had been signed in all pa rticipating countries and entered into force on 
1 December 2008 between Japan, Lao PDR, Myanmar, Singapore and Viet Nam (the Agreement is to 
become effective in relation to other ASE AN members once they have made the necessary 
notification on the completion of their respective legal procedures).  The AJCEP is legally 
independent from the individual FTAs concluded bilaterally between Ja pan and ASEAN member 
countries;  its entry into force will neither nullif y nor integrate these FTAs.  The Japanese Customs 
applies a preferential tariff based on a bilateral FTA or the AJCEP, depending upon the certificate of origin of the item concerned, thus adding to  the complexity of Japan's rules of origin.
12   
(b) Japan and the GCC (Gulf Cooperation Council) 
20. In May 2006, Japan and the member states of  the GCC (Bahrain, Kuwait, Oman, Qatar, 
Saudi Arabia, and the United Arab Emirates) held a preparatory meeting to launch negotiations for a 
free-trade agreement.  The second round of negotiations was held in January 2007.  
                                                      
11 Cases in which requests for consultations were made and panels were established between 
January 2007 and June 2008. 
12 The authorities maintain that this broadens the choice of preferential tariffs from which exporters can 
choose. WT/TPR/S/211 Trade Policy Review 
Page 22 
 
 
(c) Others 
21. At the Japan-China-Republic of Korea Trilateral Summit, held in Singapore in 
November 2007, it was decided to promote 13 c oncrete programmes for trilateral cooperation 
including drafting the "action plan", setting up the "cyber secretariat", initiating the trilateral policy 
meeting on Africa, and promoting negotiation on a trilateral investment agreement.  The Second 
Trilateral Foreign Ministers' Meeting was held in  Japan in June 2008, and the Trilateral Summit was 
held in Japan in December 2008.   
22. As part of Japan's trilateral cooperation with Ch ina and the Republic of Korea, joint research 
on a possible FTA has been conducted since 2001 by r esearch institutions from the three countries.  In 
November 2007, they issued a report stating that such an FTA will have positive effects on and many 
challenges for the three countries.  Joint research  on possible roadmaps to a trilateral FTA was 
conducted in 2008;  and in August 20 08, the third workshop of the year was held in Beijing.    
23. Japan participates in a number of regional in itiatives, including cooperation in metrology and 
measurement standards through the Asia Pacific Me trology Programme and the Asia Pacific Legal 
Metrology Forum;  it also participates in the Asia Pacific Laboratory Accreditation Cooperation 
(APLAC) with a view to cooperating in the ha rmonization of laboratory accreditation practices.  
(iii) Other agreements and arrangements 
(a) Japan–U.S. bilateral relationship 
24. Japan and the United States have continued their dialogue under the Japan–U.S. Economic 
Partnership for Growth, established in June 2001.  The partnership aims to "promote sustainable 
growth in the two countries and in the world by addressing issues such as sound macroeconomic 
policies, structural and regulatory reform, financ ial and corporate restructuring, foreign direct 
investment and open markets".  The partnershi p also provides a framework for cooperation and 
engagement on bilateral, regional, an d global economic and trade issues.  
25. The partnership provides various fora for trade cooperation:  the U.S.–Japan Subcabinet 
Economic Dialogue;  the Private Sector/Governme nt Commission;  the Regulatory Reform and 
Competition Policy Initiative;  the Investment Initia tive;  the Trade Forum;  and the Financial 
Dialogue.  The U.S.–Japan Regulatory Reform and Competition Policy Initiative has provided opportunities for officials of the two countri es to discuss reforms in key areas, including 
telecommunications, information technology, me dical devices and pharmaceuticals, financial 
services, competition policy, transparency and othe r government practices, privatization, commercial 
law revision, distribution, consular affairs, trad e and investment-related measures, and legal services 
and other legal affairs.  The latest report describ ing the measures taken in response to each party's 
recommendations for regulatory reform was issued on 5 July 2008.   
(b) Japan–EC bilateral relationship 
26. Since its previous Review, Japan has conti nued to pursue bilatera l cooperation with the 
European Communities;  for example, there are va rious dialogues on economic relations, such as the 
Japan–EU Regulatory Reform Dialogue, which is held twice a year.  At the Seventeenth Summit held 
in April 2008, Japan and the European Communiti es issued a statement "Japan-EU cooperation on 
consumer safety and protection".
13  In July 2008, the Japan-EU Business Dialogue Round Table 
                                                      
13 MOFA online information.  Viewed at:  h ttp://www.mofa.go.jp/region/europe/eu/summit/annex 
0804.html [30.10.2008]. Japan WT/TPR/S/211 
 Page 23 
 
 
(BDRT) proposed that the EU and Japanese author ities discuss the task force report on economic 
cooperation, submitted by the business communities, in  full consultation with business associations on 
both sides.   
27. The Japan-EC Customs Co-opera tion Agreement ("Agreement between the Government of 
Japan and the European Community on Cooperati on and Mutual Administrative Assistance in 
Customs Matters") entered into force on 1 February 2008.   
(c) Japan–Singapore Agreement fo r an Economic Partnership14 
28. The Agreement between Japan and the Repub lic of Singapore for a New-Age Economic 
Partnership (JSEPA) entered into force on 30 Nove mber 2002.  The overall simple average applied 
preferential tariff under the JSEPA in FY2008 is 3. 8% (Chapter III(2)(ii)) compared with Japan's 
average applied MFN tariff of 6.1%.  The authorities indicate that the JSEPA eliminates tariffs on over 98% of the total value of bilateral trade (based  on data in 2005).  Nonetheless, about 10.5% of 
tariff lines under the JSEPA, based on the FY2008 tariff schedule, have rates higher than zero
15, partly 
because it is believed that elimination of these tariffs  would not lead to significant trade expansion;  
tariff lines with non-zero rates included many coveri ng agriculture, fish and fish products, petroleum 
oils (other than crude oil), leather, leat her products and footwear , and laminated wood.16  On 
19 March 2007, the two countries agreed to impr ove market access in the area of industrial and 
agricultural products, improve specific commitments fo r financial services, revise rules of origin and 
customs procedures, and technically alter provisions on competition.17  On 27 November 2007, the 
two countries agreed to amend product-specific rules and minimum data require ments for certificates 
of origin.18 
29. In 2007, exports from Japan to Singapore incr eased by 12.9 % (Japan's total exports rose by 
10.5%), while Japan's imports from Singapore fell by 5.7% (Japan's total imports increased by 7.5%). 
(d) Japan–Mexico Agreement for an Economic Partnership 
30. The Agreement between Japan and the United Mexican States for the Strengthening of 
Economic Partnership (JUMSEPA), signed on 17 September 2004, entered into force on 
1 April 2005.19  The overall simple average applied pr eferential tariff in FY2008 is 3.7%.  Many 
agricultural products and some industrial produc ts have been excluded from the agreement.20  T h e  
authorities indicate that the JUMSEPA eliminates tariffs on some 96% of the total value of bilateral trade, based on 2002 data.  On 20 September 2006, th e two countries agreed on in-quota tariff rates 
and aggregate quota quantity for certain goods (e.g . poultry, beef, and oranges), with a view to 
                                                     
 
14 Under Japan's five bilateral FTAs in force (with Singapore, Mexico, Malaysia, Chile, and Thailand), 
an emergency tariff increase may be imposed on items subject to tariff concessi ons in accordance with each 
agreement, as long as the resulting tariff rate does not excee d the lesser of:  the applied MFN rate in effect at the 
time the measure is taken, or the applied MFN rate in effect on the day immediatel y preceding the date of entry 
into force of each agreement. 
15 Duty-free tariff lines account for about 82% of total lines. 
16 The authorities maintain that duties have been eliminated for about 21% of Japan's tariff lines in 
agriculture (WTO document WT/REG140/7, 7 February 2006). 
17 WTO document WT/REG140/N/1/Add.1, 19 September 2007. 
18 WTO document WT/REG140/N/1/Add.2, 21 January 2008.   
19 WTO document WT/REG198/N/1, 22 April 2005. 
20 Excluded items include:  meat and meat offal, dairy products, apples, rice, rice products, wheat, 
plywood, bluefin tuna, leather, leather products, and footwear.  Under the JUMSEPA, applied tariff rates for 
86.3% of total tariff lines are either zero or lower th an the corresponding applied MFN rates;  duty-free tariff 
lines account for 79.2% of all the total lines. WT/TPR/S/211 Trade Policy Review 
Page 24 
 
 
improving market access conditions.21  On 31 January 2008, they agreed on the application of 
geographical indications to some specific items.22  In 2007, exports from Japan to Mexico increased 
by 10.5%, while Japan's imports from Mexico increased by 11.8%. 
(e) Japan–Malaysia Agreement for an Economic Partnership 
31. Japan signed an FTA with Malaysia on 13 Dece mber 2005;  the agreement (JMEPA) entered 
into force on 13 July 2006.23  The overall simple average applied preferential tariff in FY2008 is 
3.3%.  Many agricultural products and some i ndustrial products have been excluded from the 
agreement.24  The authorities indicate that the JMEPA el iminates tariffs on some 97% of the total 
value of bilateral trade, based on 2004 data.  In 2007, exports from Japan to Malaysia increased by 
14.0%, while Japan's imports from Malaysia increased by 12.4%.  
(f) Japan–Chile bilateral relationship 
32. Japan signed an FTA with Chile on 27 March 2007;  the agreement (JCEPA) entered into 
force on 3 September 2007.  The overall simple averag e applied preferential tariff in FY2008 is 3.4%.  
Many agricultural products and some industrial pr oducts (e.g. rice and rice products, meat and meat 
products, fish and fish products, da iry products, pineapples, products of milling industry, leather,   
leather products and footwear, and wood produc ts) have been excluded from the agreement.25  The 
authorities indicate that the JCEPA eliminates tariffs on some 92% of the total value of bilateral trade, 
based on 2005 data.   
(g) Japan–Thailand bilateral relationship 
33. Japan signed an FTA with Thailand on 3 April 2007;  the agreement (JTEPA) entered into 
force on 1 November 2007.  The overall simple averag e applied preferential tariff in FY2008 is 3.5%.  
The agreement excludes many agricultural products and some industrial products (e.g. rice and rice 
products, meat and meat products, fish and fish produ cts, dairy products, products of milling industry, 
leather, leather products and footwear, and wood products).26  The authorities indicate that the JTEPA 
eliminates tariffs on some 95% of the total value of  bilateral trade, based on 2004 data for Japan and 
2003 data for Thailand. 
(h) Japan–Indonesia bilateral relationship 
34. The Agreement between Japan and Indonesia fo r an Economic Partnership (JIEPA), signed 
on 20 August 2007, entered into force on 1 July 2008 .  The overall simple average applied preferential 
tariff in FY2008 is 3.5%.  Many agricultural products  and some industrial products (e.g. rice and rice 
products, meat and meat products, fish and fish products, dairy products, pi neapples, products of 
milling industry, leather, leather products and f ootwear, and wood products) have been excluded from 
                                                      
21 WTO document WT/REG198/N/1/Add1, 17 October 2007. 
22 MOFA online information.  Viewed at:  http ://www.mofa.go.jp/mofaj/gaiko/fta/j_mexico/pdfs/ 
0801_skk_je.pdf [16.06.2008]. 
23 WTO document WT/REG216/N/1, 13 July 2006. 
24 Excluded items include:  dairy products, pineapples, rice, ri ce products, wheat, meat and meat 
products, wood and wood products, fish and fish products, leather, leather products, and footwear.  Under the 
JMEPA, applied tariff rates for 89.8% of total tariff line s are either zero or lower th an the corresponding applied 
MFN rates;  duty-free tariff lines account for 82.3% of all lines. 
25 Under the JCEPA, applied tariff rates for 88.7% of total tariff lines are either zero or lower than the 
corresponding applied MFN rates;  duty-free ta riff lines account for 81.4% of all lines. 
26 Under the JTEPA, applied tariff rates for 90.1% of total tariff lines are either zero or lower than the 
corresponding applied MFN rates;  duty-free ta riff lines account for 81.9% of all lines. Japan WT/TPR/S/211 
 Page 25 
 
 
the agreement.27  The authorities indicate that the JIEPA el iminates tariffs on some 92% of the total 
value of bilateral trade, based on 2005 data. 
(i) Japan–Brunei bilateral relationship 
35. Japan signed an FTA with Brunei on 15 June 2007;  the agreement (JBEPA) entered into 
force on 31 July 2008.  The overall simple average applied preferential tariff in FY2008 is 3.9%.  The 
agreement excludes many agricultural products a nd some industrial products (e.g. rice and rice 
products, meat and meat products, fish and fish products, dairy products, pi neapples, products of 
milling industry, leather, leather produ cts and footwear, and wood products).28  The authorities 
indicate that the JBEPA is to eliminate tariffs on over 99.9% of the total value of  bilateral trade, based 
on 2005 data.    
(j) Japan–Philippines Agreement for an Economic Partnership 
36. In October 2002, Japan and the Philippines agr eed to establish a working group to study the 
possibility of forming a Japan–Philippines Econom ic Partnership Agreement (JPEPA);  it was 
envisaged that the agreement would cover trad e in goods and services, investment, technical 
cooperation, and capacity building.  In Febr uary 2004, the two governments began formal 
negotiations.  On 29 November 2004, they announced that agreement "in principle" had been reached 
on all major elements of the JPEPA.  Japan and the Philippines signed the JPEPA on 9 September 2006;  it entered into force on 11 December 2008. 
(k) Japan–Korea bilateral relationship 
37. In March 2002, Japan and the Republic of Korea agreed to launch a joint study group to 
explore the possibility of establishing a Japan–Korea  Free Trade Agreement.  A report published by 
the group in October 2003 contained a study on a possible bilateral arrangement in various areas, 
including liberalization and facilitation of trade.  In October 2003, the two countries decided to start 
negotiations for a comprehensive FTA with a target of finishing the substance of the negotiations in 
2005.  The first round of negotiations was held in December 2003 and five furthe r rounds were held in 
2004;  there have been no negotiations since the end of the sixth round, in November 2004.  On 
25 June 2008 and 4 December 2008, working-level c onsultations were held with Korea to "consider 
and create a favourable environment for" the resumption of negotiations. 
(l) Bilateral relationships with Viet Na m, India, Australia, and Switzerland  
38. On 19 October 2006, the leaders of Japan and Viet Nam agreed to launch negotiations on a 
bilateral free-trade agreement;  the seventh round of negotiations was held in April 2008.  In 
December 2006, the leaders of Japan and India agreed to launch FTA negotiations;  the 
eleventh round of negotiations was held in Decemb er 2008.  On 12 December 2006, the leaders of 
Japan and Australia agreed to launch FTA negotiati ons;  the sixth round of negotiations was held in 
July 2008.  Since May 2007, there have been eight  rounds of negotiations for an FTA between Japan 
and Switzerland. 
                                                     
 
27 Under the JIEPA, applied tariff rates for 88.7% of total tariff lines are either zero or lower than the 
corresponding applied MFN rates;  duty-free ta riff lines account for 81.8% of all lines. 
28 Under the JBEPA, applied tariff rates for 86.9% of total tariff lines are either zero or lower than the 
corresponding applied MFN rates;  duty-free ta riff lines account for 81.5% of all lines. WT/TPR/S/211 Trade Policy Review 
Page 26 
 
 
(m) Other bilateral arrangements 
39. In 2002, Japan and China agreed to estab lish the Japan–China Economic Partnership 
Consultation scheme, with a view to identifying  possible economic disputes at an early stage, 
preventing disputes between the two countries, and further strengthening mutually complementary 
economic relations.  In these consultations, the two countries exchanged opinions on issues including 
IPR, China's commitment under the WTO rules, agri culture and quarantine, and other trade-related 
issues, as well as Japan-China cooperation within the international economy.  There have been 
six such consultations at deputy director-gener al level, the most recent in October 2007.  
40. In November 2005, the Prime Ministers of Japan and Canada signed the Japan–Canada 
Economic Framework, aimed at reinforcing economi c ties through cooperation in 15 priority areas, 
and decided to undertake a joint study on the costs an d benefits of further prom oting of bilateral trade 
and other forms of bilateral cooperation.29  Little progress seems to have been made since Japan's 
previous Trade Policy Review.  
41. Japan has concluded bilateral agreements on so cial security with various trading partners.30  
These agreements, inter alia,  aim to avoid double payment (into two social security systems) by 
people working both in Japan and another country and to consolidate the insured periods of both 
countries to enable these people to receive a combin ed pension.  An agreement with Australia was 
adopted in June 2007, and agr eements with the Netherlands and with the Czech Republic were 
adopted by the Diet in June 2008.  
42. Japan signed new tax treaties with Paki stan and Australia in January 2008.31  In addition, it 
signed a protocol amending the current bilateral tax treaty with France in January 2007;  the 
amendment entered into force in December 2007.   A protocol amending the bi lateral tax treaty with 
the Philippines was also signed in December 2006;  this has not yet entered into force.  "Tax sparing" 
provisions in the treaty with Pakistan were remove d in the new treaty, which entered into force in 
November 2008.32  None of the tax treaties Japan has signed contains MFN provisions.  
43. Since 2007, Japan has promoted cooperation ag reements on competition in the form of 
competition chapters in its FTAs (EPAs).  To da te, seven agreements on competition have entered 
                                                      
29 The 15 priority areas are:  social security, c ooperation on anti-competitive activities, food safety 
cooperation, customs cooperation, trade facilitation, transportation, i nvestment, science and technology, 
information and communication technology, electric comme rce, e-government, energy and natural resources, 
climate change, tax convention, and tourism promotion. 
30 These are agreements with:  Germany (effective February 2000), the United Kingdom 
(February 2001), the Republic of Korea (April 2 005), the United States (October 2005), Belgium 
(January 2007), France (June 2007), and Canada (March 2008). 
31 Japan also has tax treaties with Armenia, Austria,  Azerbaijan, Bangladesh, Belarus, Belgium, Brazil, 
Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Fiji, Finland, France, Georgia, Germany, Hungary, 
India, Indonesia, Ireland, Israel, Italy, Republic of Korea, Kyrgyz Republic, Luxembourg, Malaysia, Mexico, 
Moldova, the Netherlands, New Zealand, Norway, the Phili ppines, Poland, Romania, Russia, Singapore, Slovak 
Republic, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Tajikist an, Thailand, Turkey, Turkmenistan, 
Ukraine, the United Kingdom, the United States, Uzbekistan, Viet Nam, and Zambia. 
32 "Tax sparing" is a means by which the tax system  of a capital-exporting country can be made to 
accommodate the tax incentives of developing countries.  More specifically, in this case, Japan "spares" the tax 
it would normally impose on the untaxed (or low-taxed) income earned by Japanese investors in Pakistan by 
granting them foreign tax credits equal to  the tax they would have paid in Pakistan (in the absence of the 
incentives).  Japan's bilateral tax treaties with Sri La nka, Zambia, Brazil, Pakistan, the Philippines, China, 
Thailand, Bangladesh, and Viet Nam have tax sparing provisions. Japan WT/TPR/S/211 
 Page 27 
 
 
into force (with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, and the Philippines) 
(Chapter III(4)(vi)). 
44. Japan currently has bilateral investment trea ties with 13 trading partners (section (5)(i) 
below).  
(n) APEC (Asia-Pacific Economic Cooperation) 
45. In 2007, 65.0% of Japan's merc handise imports were from APEC members, and 74.3% of its 
merchandise exports were to APEC.  In keeping with its policy of supporting multilateral trade and 
investment liberalization, Japan is a strong supporte r of APEC's "open regiona lism" goals.  Like other 
members, Japan submits an annual Individual Acti on Plan (IAP) that provides a roadmap of its 
intended actions in various policy areas with a vi ew to realizing APEC's liberalization goals.33  At the 
Sixteenth APEC Leaders' Meeting, held in Lima in November 2008, Ministers, inter alia,  agreed to 
take all necessary economies and financial measures to resolve the current financial crisis;  they also 
stated a support for a prompt, ambitious, and balanced conclusion to the DDA. 
46. In May 2007, Japan held a Symposium on Investment Liberalization and Facilitation, 
organized by APEC, in Tokyo;  the symposium iden tified three priority issues for improvement in the 
investment climate:  to explore the possibility of  developing a regional in vestment arrangement in 
APEC;  to continue a vigorous dialogue between the public and private sectors;  and to implement 
capacity building projects to share best practices.   
(o) ASEM (Asia-Europe Meeting) 
47. The sixth ASEM Summit (ASEM6) was held in  Helsinki in Septem ber 2006.  The meeting 
adopted the "Helsinki Declaration on the Future of ASEM", which emphasized ASEM's role as a 
framework for dialogue and cooperation, and reconfirmed its members' commitment to multilateralism.
34  Japan participated in the first ASEM  ICT Ministerial Meeting in Hanoi in 
November 2006, the eighth ASEM Foreign Ministers' Meeting in Hamburg in May 2007, and the first Small and Medium Enterprises Ministerial Meeting in Beijing in October 2007.  In November 2007, 
Japan hosted the seventh ASEM Customs DG – Commissioner Meeting in Yokohama.  It also 
participated in the eighth ASEM Finance Minist ers' Meeting in Jeju Island in June 2008.  
48. ASEM leaders adopted the ASEM Trade Fac ilitation Action Plan (TFAP) at the London 
Summit in April 1998 to reduce non-tariff barriers and to promote trade opportunities between Asia 
and Europe.  For the period 2006-08, the TFAP has f our priority areas:  customs procedures, standards 
and conformity assessment, intellectual property righ ts, and e-commerce.  Since its previous Trade 
Policy Review, Japan has been involved in variou s trade-related activities under the TFAP, including 
participation in the tenth Meeting of the ASEM Customs Procedure Working Group in Kota Kinabalu 
(March 2007), and the thirteenth ASEM Meeting on Standards and Conform ity Assessment in Bali 
(May 2007).  
(iv) Preferential treatment 
49. Japan's Generalized System of Preferences (GSP) scheme grants preferential tariff treatment 
to certain developing countries under the Temporary Tariff Measures Law.  The Government has the 
                                                     
 
33 The latest available IAP for Japan was issued in 2007 (APEC online information.  Viewed at:  
http://www.apec-iap.org/document/J PN_2007_IAP.htm [25.06.2008]). 
34 ASEM 6 online information:  "ASEM 6:  Overview  and report".  Viewed at  http://www.asem6.fi/ 
news_and_documents/en_GB/1169819293034 [25.06.2008]. WT/TPR/S/211 Trade Policy Review 
Page 28 
 
 
authority to unilaterally designate, withdraw, suspe nd, and limit beneficiaries or products that receive 
preferential treatment under the GSP scheme.  In 2001, Japan extended its GSP scheme to 
31 March 2011 and introduced va rious measures, such as expanding the product coverage of 
tariff-free and quota-free treatment for goods originating in  LDCs.  As a result, all textile and clothing 
products from LDCs enter Japan duty free and quota free.  
50. The simple average GSP tariff rate is 4.9% (FY2008).  Japan grants preferential tariff 
treatment under its GSP scheme to 141 developing countries and 14 territories for 337 agricultural and 
fishery products and 3,216 industria l products at HS nine-digit level.35  The GSP scheme excludes 
many agricultural products and some industrial pr oducts (e.g. rice and rice products, meat and meat 
products, fish and fish products, dairy products, pineapples, cereal products, textiles and clothing, 
leather, and leather products, and f ootwear).  Under the GSP, applied tariff rates for 75% of total tariff 
lines are either zero or lower than the corresponding applied MFN rates;  duty-free tariff lines account 
for 61.1% of all lines. 
51. The depth of tariff cuts varies according to the product;  the authorities indicate that tariffs on 
industrial products are zero, except on sensitive indus trial products (1,184 items at the HS nine-digit 
level in 78 product groups) to which various pref erential rates apply (0%, 20%, 40%, 60%, 80% of 
MFN rates), up to specified ceilings.36  However, preferential treatment is suspended on a monthly 
basis when ceilings are reached.  The ceilings ar e open for utilization by all beneficiaries.  If 
preferential imports from one beneficiary exceed one-fi fth of the total value or volume of the overall 
ceiling, the preferential treatment for that benefici ary is suspended.  Preferential treatment under the 
GSP scheme is granted on the condition that goods  fulfil Japan's GSP rules of origin.  The 
administration of ceilings and maximum country vo lumes are managed on a first-come, first-served 
basis. 
52. On 1 April 2007, Japan revised its duty-fr ee and quota-free treatment for 49 LDCs by 
expanding the coverage of products under the G SP for LDCs in accordance with its Development 
Initiative for Trade.37  As a result, the coverage has increased from about 86% to 98% defined at the 
HS nine-digit level;  and the simple average a pplied rate for LDCs in FY2008 is 0.5%.  For the 
remaining 160 tariff lines (1.8% of the total)38, the applied rates on imports from LDCs are the same 
as the applied MFN rates.  Data provided by the authorities indicate that the value of imports from LDCs under the duty-free and quota-free treatme nt amounted to ¥62,904 million in FY2006. 
53. In 2007, Japan removed Romania and Bulgaria fro m its GSP list, as a result of their accession 
to the European Union;  it also removed French Polynesia.  In 2008, Japan removed the Republic of 
Cape Verde from its list of LDCs.  China remains the main beneficiary of GSP treatment (Table II.2).   
                                                     
 
35 Japan's Generalized System of Preferences.  Viewed at:  http://www.mofa.go.jp/policy/ 
economy/gsp/index.html. 
36 In FY2006, tariff rates under the GSP scheme for the following products (HS nine-digit) were 
suspended:  160414092, 160414099, 160419090, 160590294, 282410000, 283620100, 290531000, 460121000, 
460122000, 460129910, 460129990, 691200000, 821300000, 821599000, 940490010, 940490020, 940490030, and 940490090. 
37 In December 2005, Japan announced, in its Develo pment Initiative for Trade, that it would provide 
duty-free and quota-free market  access (i.e. duty-free treatment without a ceiling) for "essentially all products" 
originating from all LDCs (Japan's New Development Ini tiative for Trade.  Viewed at:  http://www.mof.go.jp/ 
english/tariff/wto/wto.htm [13.06.2008]). 
38 These cover, for example, fish and fish products, products of the milling industry, sugar, and articles 
of leather and footwear. Japan WT/TPR/S/211 
 Page 29 
 
 
Table II.2 
Ten largest GSP beneficiaries, FY2007  
(¥ million) 
Beneficiaries Import value of preferential treatment Share (%) 
China 1,638,488 68.5 
Indonesia 148,341 6.2 
The Philippines 129,613 5.4 
Thailand 121,073 5.1 
Viet Nam 61,886 2.6 
South Africa 52,478 2.2 
India 44,208 1.8 
Brazil 36,137 1.5 
Myanmar 25,542 1.1 
Zimbabwe 22,142 0.9 
World 2,390,934 100.0 
Source:  Information provided by the Japanese authorities. 
(5) FOREIGN INVESTMENT REGIME  
54. In FY2006, foreign affiliated firms accounted for 2.3% of total sales in Japan (2.3% in 
FY2005), and 1.3% of employment (1.2% in FY2005).39  Inward FDI in Japan  remains substantially 
lower than outward FDI, and is relatively low co mpared with that in other large OECD economies 
(Chapter I(4)(iv)).  Against this background, Japan has continued to take measures to make itself an 
attractive investment destination for foreign firms;   in March 2006, it set a new goal of doubling the 
share of FDI in GDP by 2010.   
55. The authorities consider that FDI brings bene fits to Japan by, for example, creating new 
management resources, such as personnel, capital,  and sales networks and bringing in new 
technologies40;  creating employment opportunities;  and increasing benefits to consumers by 
providing wider choices and be tter quality of goods and services resulting from intensified 
competition introduced by FDI.  
(i) Regulatory regime 
56. The regulatory regime on inward and outward FDI is governed mainly by the Foreign 
Exchange and Foreign Trade Act, together with  relevant cabinet and ministerial ordinances.41  Inward 
FDI generally requires ex post facto  reporting to the Minister of Finance and the Minister in charge of 
the industry involved, within 15 days of executing a foreign investment in Japan.  Prior notification is required, in principle, for inward FDI in industri es recognized in the OECD Code of Liberalization of 
Capital Movements, such as agriculture, forestry a nd fisheries, crude oil, leather and leather products, 
and air and maritime transport;  in addition, prior notification is required in some other sectors on the 
grounds of "public order, public safety,  and national security" (Table AII.3).
42  Besides the 
                                                      
39 METI (2007b) (latest available data). 
40 According to METI (2007b), the profit rate on sales in FY2006 was 5.3% for foreign affiliated 
companies compared with 3.5% for all incorporated enterprises in Japan as defined in the Ministry of Finance 
Financial Statement Statistics of Corporations by Industries. 
41 Among the most important ordinances are the Foreign Exchange Order and the Order of Inward 
Foreign Direct Investment. 
42 These include aircraft, arms, explosives, nuclear power, electric utilities, gas utilities, water, heat 
generation, rail transport, passenger transport, tel ecommunications (accompanying certain network facilities), 
television and cable television, and broadcasting sectors. WT/TPR/S/211 Trade Policy Review 
Page 30 
 
 
notification requirements, various other laws stipulat e specific restrictions on inward FDI in certain 
sectors, including real estate, fisheries, financial services, telecommunications, and transport.43  I n  
April 2008, the Government recommended against a particular FDI proposal in electric utilities, on 
"national security, public order and public safety" grounds44;  this was the first recommendation under 
the Foreign Exchange and Foreign Trade Act. 
57. On 28 September 2007, the Government revised  regulations concerning FDI in order to 
prevent foreign investments from adversely affect ing the maintenance of Japan's defence-related 
industrial base and the proliferation of sensitive tec hnologies related to weapons of mass destruction.  
Under the revision, selected products that are deemed  convertible to military equipment are added to 
the list of products subject to prior notification as stipulated in the Appendix of the Export Trade 
Control Order.   
58. The provisions of bilateral investment treaties (B ITs) also regulate investment policy.  Japan 
signed BITs with Cambodia in 2007, and with La o PDR in 2008;  they entered into force on 
31 July 2008 and 3 August 2008, respectively.45  Japan also has BITs with Bangladesh;  China;  
Egypt;  Hong Kong, China;  the Republic of Korea;  Russia;  Sri Lanka;  Turkey;  Mongolia;  
Pakistan;  and Viet Nam.   
(ii) Investment promotion measures 
59. There are no tax measures aimed specifically at  FDI promotion (excluding provisions of tax 
treaties).  The authorities maintain that no estimat es are available for tax revenue forgone through 
measures to promote FDI, partly because some tax measures with other objectives may also contribute 
to increasing FDI. 
60. In its FY2007 tax reform, the Government adopted measures regarding the tax treatment of 
corporate reorganization, such as taxation meas ures pertaining to the expansion of "allowable 
considerations" for mergers and other reorganiza tion (triangular mergers) under the new Corporate 
Law, and measures to prevent inte rnational tax avoidance associated  with corporate reorganizations.46  
No financial measures have been introduced specifi cally to promote FDI in Japan.  Japan's current 
measures, aimed at removing obstacles to FDI, app ear to be associated largely with institutional 
reforms, such as those of regulations on cross- border mergers and acquisitions as well as movement 
of natural persons, improvement in infrastructure related to logistics and R&D, improvement in 
medical care and education for foreigners, and semi nars and sales campaigns by ministers and local 
government leaders to invite FDI into Japan.   
                                                      
43 See WTO (2001) for details of the specific restrictions. 
44 Article 27-5 of the Foreign Exchange and Foreign Trade Act stipulates that the Government may 
recommend a person that has given notification of inward FDI to change the content of or discontinue the FDI for "national security, public order and public safety" reasons.  The authorities consider that the definition of 
"national security" complies with Article 3 of the OE CD Code of Liberalisation of Capital Movements. 
45 These BITs stipulate investment protection and liberalization by, for example:  providing, in 
principle, national treatment and MFN treatment with re spect to "pre-establishment phase of investments";  
obliging the contracting parties to abide by their contra cts with investors;  and prohibiting, in principle, 
performance requirements that might hinder investment. 
46 MOF online information (in Japanese).  Viewed  at:  http://www.mof.go.jp/jouhou/syuzei/zeisei07/ 
04/index.html [02.07.2008].  The relaxation of restrictions on merger consideration from May 2007, as stipulated in the Corporate Law, allowed "triangular mergers";  under this scheme, shares of a parent company 
are used as a merger consideratio n for the merger of its subsidia ry company with another company 
(Chapter III(4)(i)) (MOF online information.  Viewed  at:  http://www.mof.go.jp/english/f_review/fr84e.htm 
[02.07.2008]). Japan WT/TPR/S/211 
 Page 31 
 
 
61. The Japan Investment Council (JIC), a minister ial-level council established in July 1994, was 
until recently the central body for promoting FDI in Japan.  On 9 March 2006, the JIC announced a 
goal of doubling the share of FDI in GDP by 201047;  and, to this end, it launched the Program for the 
Acceleration of Foreign Direct Investment in Jap an in June 2006.  The programme focused on three 
key issues:  attracting FDI not only to the Tokyo Metropolitan areas but throughout Japan;  improving 
further the investment environment to sustain Japan's globally competitive edge;  and actively 
promoting and providing information regarding Japan's efforts to attract FDI.  However, the JIC was 
abolished on 28 December 2007, and the Expert Committee on FDI Promotion was established in the 
Cabinet Office in January 2008.48  The Committee's Five Recommendations Toward the Drastic 
Expansion of Foreign Direct Investment in Jap an, submitted to the Council on Economic and Fiscal 
Policy, on 20 May 2008, covered:   enhancement of the system to facilitate M&A;  comprehensive 
studies on FDI regulations;  establishment of priori ty strategies by sector;  reduction of business costs 
and improvement of transparency;  a nd regional revitalization by FDI.  
62. Through its Project to Promote Foreign Direct I nvestment in Selected Areas, the Government 
supports activities conducted by selected regional gove rnments, include planning of strategies to 
attract FDI, public relations, inviting potential invest ors, and helping the start-up process of selected 
companies.  In FY2004, four regions were selected for such support measures;  by FY2007, 17 regions had been selected.  In FY2008, the Gove rnment started a project to help in potential 
investors to regional exhibitions, with a view to creating further business opportunities in Japan.  On 
14 January 2007, the leaders of China, Japan, a nd the Republic of Korea decided to launch 
negotiations for a trilateral investment agreement.   The fifth round of negotiations was held in 
November 2008.   
63. Japan's bilateral economic partnership agreem ents (involving free-trade agreements) with 
Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, ASEAN, and the Philippines 
include provisions on investment;  articles on na tional treatment and prohibition of performance 
requirements are included in the agreements.  These articles are applied to investors and investments 
as defined in the agreements, with ex ceptions specified in the annexes. 
                                                     
 
47 Thus, a target for inward FDI of around 5% of GDP. 
48 The authorities maintain that the abolition of JIC does not affect Japan's policy on FDI promotion, 
including the goal of doubling FDI by 2010.  The Program for th e Acceleration of Foreign Direct Investment in 
Japan remains valid, and when deemed necessary, a Cabinet meeting or other ministerial meetings will be held to discuss further policies on FDI.